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NEWS RELEASE CALIBER [LOGO]
CONTACT: R. M. ADAMOV Caliber System, Inc.
CALIBER SYSTEM, INC. 3560 West Market Street
(330) 665-8894 P.O. Box 5459
Akron, OH 44334-0459
(330) 665-5646
http://www.calibersys.com
FOR IMMEDIATE RELEASE
CALIBER SYSTEM ANNOUNCES THIRD QUARTER RESULTS
AKRON, OHIO, SEPTEMBER 23, 1996 - Caliber System, Inc. (NYSE: CBB)
reported revenue today of $627.2 million for the third quarter ended September
7, 1996 (See Note), a 13.5% increase over third quarter 1995 revenue of $552.7
million. Loss from continuing operations for the third quarter of 1996 amounted
to $2.0 million, or ($.05) per share compared to income of $22.2 million, or
$.56 per share in 1995.
For the first three quarters ended September 7, 1996, revenue was $1.83
billion an increase of 10.8% from $1.65 billion for the same period of 1995.
Income from continuing operations for the first three quarters of 1996 was $7.9
million or $.20 per share, compared to $66.1 million, or $1.67 per share, for
the comparable period of 1995.
"As previously indicated, our third quarter results reflect ongoing
operating losses at Viking Freight, the Company's emerging superregional
carrier, and lower than planned volume growth at RPS, Caliber's small package
carrier," said Daniel J. Sullivan, Chairman of the Board, President and Chief
Executive Officer of Caliber. "We anticipate a profitable fourth quarter;
although, as announced on July 1, we will finish the year with 1996 results
significantly below those of 1995."
Viking's Third Quarter Results
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Revenue at Viking amounted to $227.9 million for the third quarter of
1996 representing a 19% increase over the third quarter of 1995. Viking's
operating loss for the third quarter was $36.1 million as compared to a loss of
$5.8 million in the same quarter last year. The increased third quarter 1996
loss is due to aggressive discounting within the industry, and a significant
increase in expenses related to operating inefficiencies associated with the
consolidation of the company's four regional carriers into the "new" Viking and
the one-time costs that accrue to that reorganization. Higher fuel prices also
negatively effected the quarter.
"I have spent considerable time studying Viking's operations and
believe the basic fundamentals of the business to be solid," Sullivan said. "The
cost overruns this year are clearly unacceptable. We are challenging our
operational and administrative expenses and have initiated a major study of our
terminal and linehaul operations. In addition to the external forces of a very
competitive industry, the situation at Viking is the result of several internal
issues caused by significant tonnage growth during the process of consolidation
and operations ability to respond on a national basis."
"First, positive marketplace acceptance of the `new' Viking resulted in
rapid volume growth, particularly in long haul lanes, but Viking's network was
unable to absorb these business levels. Viking is now pursuing an aggressive
revenue improvement strategy, eliminating unprofitable business which will allow
the company to align tonnage levels with existing capacity, reduce cost and
focus on the more profitable, primarily regional business. On a positive note,
many accounts have accepted discount reductions and chosen to keep their
business with Viking. Viking also announced a 5.9% rate increase, effective
September 16, 1996."
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"Second, operating problems have surfaced during the consolidation of
the four regional carriers because of this growth beyond planned levels,
generating additional costs for training new hires, purchased transportation,
equipment rentals, overtime and generally lower than expected productivity.
Viking's 1996 operating results also include substantial nonrecurring
consolidation costs due to the integration of multiple information systems,
re-identification of equipment, merging of administrative operating systems and
the closing of three regional corporate headquarters. In response, Viking is
focused on completing the consolidation as efficiently and as quickly as
possible," commented Sullivan.
The former Spartan and Coles operations are now resident on the Viking
information system. The conversion of the former Central Freight Lines to the
Viking system is in the second of four phases and will be completed by
mid-October. The Coles' headquarters is closed and Spartan's will be shut down
by year end. Overall staffing is being reduced and plans are being finalized for
closing Central Freight's corporate office during the beginning of 1997.
"I have personally walked many docks at our Viking terminals and spent
substantial time in San Jose with the Viking team and can report problems are
being quickly identified and solutions developed and implemented. Every aspect
of the business, from marketing and pricing strategies to load plans and P&D
route structures, is under careful review. Our people are very enthusiastic and
believe that Viking can achieve operating efficiencies that will lead to
significant future cost reductions," said Sullivan.
"We are very pleased with the progress of transferring the original
Viking culture to the new organization. Our employees are moving through the
change process and I am impressed with the team spirit and high morale of our
Viking people," said Sullivan. "Viking's well known reputation for providing the
highest levels of service remains a key differentiator in the marketplace and I
am convinced our Viking team will deliver that same quality from coast to
coast," added Sullivan.
RPS Revenues Increase 4.4%
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Revenues at RPS amounted to $304.3 million for the third quarter of
1996, representing a 4.4% increase over the third quarter of 1995. Operating
income amounted to $25.6 million in the third quarter of 1996 compared to $37.3
million in the third quarter of 1995. Operating income increased slightly from
the second quarter; however, a sluggish retail sector, aggressive pricing
environment, and increased fixed costs due to our expansion efforts have
resulted in a reduction in operating profits from 1995.
"RPS is competing hard; the company is focused on customer service and
product quality in its core market segments, while reducing costs in line with
volume levels. Investment in non-critical programs and products is being
reevaluated and reduced or eliminated if appropriate," noted Sullivan. "We are
implementing a number of cost control measures - such as reevaluating the
terminal network to decrease linehaul and P&D costs, and sharing linehaul power
and facilities with other Caliber companies. A number of RPS headquarters
positions have been eliminated commensurate with the reduction in workload,"
said Sullivan.
"We are very pleased to see improving service levels in the fourth
quarter, our busiest time of the year. The RPS operation is very smooth today.
Additionally, we are extremely proud of RPS people for winning the American
Trucking Associations' (ATA) 1996 President's Trophy for Safety Performance in
the `Over 20 Million Miles' category. RPS is the first company to win this award
with a team comprised totally of independent contractors," noted Sullivan.
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Roberts Express and Caliber Logistics Show Continued Strong Revenue Growth
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Roberts Express, the Company's expedited carrier, continues to see
strong revenue growth reporting a 17.5% increase over the third quarter last
year. This increased revenue has been realized while maintaining excellent
margins with third quarter operating income up 23.6% from 1995 levels. Caliber
Logistics continues to demonstrate strong revenue improvement with a 53.1%
increase in the third quarter, and is expected to meet profit objectives for
1996.
Consolidated results were also positively effected by an overall
reduction in pension expense due in part to our long-term rate of return on our
pension assets.
"I have recently met with three hundred Caliber customers. Their
response to our service offerings and our vision for the future is extremely
positive and very encouraging. Our customers believe our strategy is sound, our
market positioning is correct and we are on the right track. Certainly, that
confidence has helped us in achieving greater than 13% revenue growth over last
year's same quarter," said Sullivan. "Caliber remains committed to growing our
business profitably and delivering value to our customers and shareholders."
Unaudited revenue and earnings for the third quarter of 1996, with
comparable figures for 1995, are as follows:
Twelve Weeks Ended
(Third Quarter)
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Sept. 7, 1996 Sept. 9, 1995
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(dollars in thousands, except per share data)
Revenue $ 627,226 $ 552,741
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Operating Income $ 224 $ 33,029
Other (Expense) Income, Net (2,965) 2,074
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Income (Loss) from Continuing
Operations Before Income Taxes (2,741) 35,103
Provision (Benefit) for Income Taxes (771) 12,885
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Income (Loss) from Continuing Operations (1,970) 22,218
Loss from Discontinued Operations -- (19,890)
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Net Income (Loss) $ (1,970) $ 2,328
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Earnings (Loss) Per Share:
Continuing Operations $ (.05) $ 0.56
Discontinued Operations -- (0.50)
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Net Income (Loss) $ (.05) $ 0.06
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Average Shares Outstanding 39,505 39,470
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Unaudited revenue and earnings for the first three quarters of 1996, with
comparable figures for 1995, are as follows:
Thirty-Six Weeks Ended
(Three Quarters)
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Sept. 7, 1996 Sept. 9, 1995
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(dollars in thousands, except per share data)
Revenue $ 1,825,201 $ 1,646,989
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Operating Income $ 19,819 $ 98,240
Other (Expense) Income, Net (5,567) 6,232
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Income from Continuing
Operations Before Income Taxes 14,252 104,472
Provision for Income Taxes 6,381 38,367
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Income from Continuing Operations 7,871 66,105
Loss from Discontinued Operations -- (59,928)
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Net Income $ 7,871 $ 6,177
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Earnings (Loss) Per Share:
Continuing Operations $ 0.20 $ 1.67
Discontinued Operations -- (1.51)
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Net Income $ 0.20 $ 0.16
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Average Shares Outstanding 39,512 39,457
Note : The Company operates on a 13 four-week period calendar with 12
weeks in each of the first three quarters and 16 weeks in the fourth quarter.
The foregoing Release contains forward-looking statements that are
based on current expectations and are subject to a number of risks and
uncertainties. Actual results could differ materially from current expectations
due to a number of factors, including general economic conditions; competitive
initiatives and pricing pressures; availability and cost of capital; shifts in
market demand; weather conditions; the performance and needs of industries
served by the Company's businesses; actual future costs of operating expenses
such as fuel and related taxes; self-insurance claims and employee wages and
benefits; actual costs of continuing investments in technology; the timing and
amount of capital expenditures; and the actual costs and effects of the
continuing consolidation of the regional carriers.
Caliber System, Inc. is a leading, value-added provider of
transportation, logistics and related information services. Its operating units
include RPS, a business-to-business small package carrier; Viking Freight, a
superregional freight carrier; Caliber Logistics, a supplier of contract
logistics services; Roberts Express, a critical-shipment carrier; and Caliber
Technology, a provider of computer-based solutions for customers.
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